Internet, Sports Team Up for $3 Billion Market

Consumers are expected to spend approximately $3 billion in sporting goods, apparel, footwear, and event tickets online in 2003, according to research by Jupiter Communications.

Unlike many other Internet industries that have seen large-scale cannibalization of traditional revenues and audiences, sports content actually presents an incremental business opportunity. According to Jupiter, fears of cannibalization within the Internet sports category are unfounded due to the near-term and future realities of the narrowband Internet. Online sports consumption tends to be one of the most important segments in the consumer content pace. Jupiter research indicates that online sports content is ranked as one of the top five favorite activities of online consumers and consumption centers around complimentary, rather than replacement, content.

Linear programming will not be a reality in the Internet-sports business because less than 5 percent of the US population has a broadband connection from their home.

“Leagues, teams, and broadcasters securing high-dollar rights fees shouldn’t fear that the Internet will cannibalize viewership or effect gate revenue,” said Patrick Keane, senior analyst for Jupiter’s sports research. “Sports content providers will reap incremental revenue as the Internet continues to exist as a complementary channel and medium.”

According to Keane, companies engaging in the Internet sports sector must take advantage of the growing sector by diversifying their revenue streams. Depressed commerce margins must encourage commerce players to diversify through advertising and content partnerships, he said. Media players should consider adding Internet commerce revenue to help companies to experiment on expanded offerings to consumers and advertisers.

The Internet affords sports leagues and organizations that traditionally sustained on rights and merchandising revenues alone, the opportunity to diversify revenues through paid content, licensing, syndication, advertising, and commerce, Keane said. Jupiter’s research on the Internet sports sector reveled that one-third of the expected $3 billion market in 2003 will represent online purchase of sporting events tickets. In addition, practical convergent programming will flourish in sports media. Jupiter’s research also found that more than half of the online audience either sometimes or often watches television while online.

According to a study by Forrester Research, more than 22 percent of the households in North America actively follow sports on the Web. By 2004, Forrester predicts that advertising on sports-related Web sites will reach $2.4 billion, with sports-related e-commerce climbing to $4.7 billion. For a typical league such as the NBA, online revenue streams are predicted to contribute as much as 15 percent of total revenues in 2004.